Abstract:

Abstract: The United States currently confronts a severe increase in medical costs
and a simultaneous decrease in the availability of health care services. A nearly identical
situation recently emerged in the Commonwealth of Australia. This phenomenon, often
labeled the "medical malpractice crisis," results in part from an increasing litigious trend
spurred on by the appeal of potentially enormous damage awards. More lawsuits filed
and increased award amounts raise the liability of health care providers and generate
uncertainty in the medical malpractice insurance market. This in turn drives up the costs
of insurance policy premiums and ultimately forces health care providers to diminish
their delivery of health services. In response, many states implement reform initiatives
that cap the maximum amount recoverable for an injured patient's non-economic loss.
Australian jurisdictions, by contrast, take a more comprehensive approach to liability
reform that incorporates a minimum loss requirement and a calculation scheme that
proportions non-economics damage awards based on a hypothetical "most extreme case."
The Australian approach not only limits the quantum of damages available to plaintiffs,
but also produces more consistent damage awards than the U.S. cap approach. That is,
Australian-style reform reduces the uncertainty posed to insurers in estimating their
policyholders' liability. In turn, insurers can more accurately set rates.
The reform model followed by Australia is appropriate for the United States. If
implemented, it would alleviate inefficiencies created by certain features unique to the
U.S. legal system, including civil jury trials and contingency fee agreements. The
regulation of non-economic damage awards in a manner consistent with Australia's
reform thus presents a desirable model for U.S. policymakers, state legislatures, and the
federal government to emulate in the current medical malpractice crisis.